MEDIA SECTOR

The Espresso group closed 2010 with consolidated revenues of € 885 million, in line with the figure of € 886.6 million for 2009, and with consolidated net income of € 50.1 million, up from € 5.8 million in 2009.

The revenues of the group can be broken down as follows:

The year 2010 was characterized by a weak recovery of the Italian economy with continuing uncertainty as to international and national prospects.

In this context even advertising revenues showed a moderately positive trend, growing by 3.8% on 2009, with different performances in the various economic sectors, and making only a modest recovery from the contraction of 15.2% experienced in the two years 2008-2009 (Nielsen Media Research data).

The most innovative media saw the best dynamics (+28.8% for satellite TV and +20.1% for the internet) and, of the traditional media, radio and television did in any case report positive performance (+ 7.7% e + 4.5% respectively). The press, however, was down again  (-4.3%), both the daily newspapers and the periodicals. As far as circulation is concerned, the global outlook remains critical: ADS figures (moving average for the last 12 months in November 2010, on the same range of products) show a decline in sales on the news-stands of 5.7% for the daily newspapers, of 4% for weeklies and of 10.3% for monthlies.

Circulation revenues, which did not benefit from any price hikes for the newspapers or for the periodicals, came to € 267.9 million, down from € 274.2 million in the previous year (-2.3%). However, all the main titles of the group performed better than their respective markets. 

On the basis of the latest figures published by ADS and Audipress, La Repubblica confirms its ranking as number one newspaper both in terms of number of copies sold on the news-stands and in terms of number of readers.

The circulation figures for L’Espresso were down by 2.8% on the previous year (ADS in November), while the market lost 3.3%, and it still has an average of 2.5 million readers per week.

Lastly, the circulation figures for local newspapers posted a decline of 3% due to the economic crisis scenario. The decline is however significantly lower than the market and the results of an Audipress survey confirm an average number of readers per day of over 3.3 million.

Advertising revenues totalled € 528.4 million, posting growth of 6.3% compared to 2009.

Internet is the medium that showed the most positive evolution (+21.8%), not only following the trend of the sector but also because of the development of the group websites and their users. In particular the Repubblica.it website has become more and more successful and with an average of 1.6 million unique users per day  (+24.2%) consolidated its position as the top Italian news website.

Advertising collected by the group radio stations went up by 8.4%, underpinned both by the recovery in that specific market (+7.7%), and by the good results of the group broadcasters, which saw the leadership of Radio Deejay confirmed and a good outcome obtained by the changes made to the programming of Radio Capital.

Revenues from optional products came in at € 66.3 million and were down by 34% on 2009. In a sharply contracting market, the group decided to focus its activity on a more restricted number of initiatives, obtaining a high level of profitability in line with that of previous years.

During the last two years a company reorganization plan was implemented with the aim of achieving savings of € 140 million when the plan was fully up and running (in 2011), which is equal to 17% of the costs incurred in 2008.  In 2010 the savings target was already fully met, without reducing the product range or portfolio of the group and without jeopardizing quality in any way.

The consolidated gross operating margin came in at € 147.2 million and was up by 38% from € 106.7 million in 2009.

The consolidated operating result was € 109.1 million, with a rise of 70.6% on the figure of € 63.9 million in 2009, with a much higher level of profitability than in the previous two years. All the main activities of the group reported a considerable improvement in their profitability which was due, for the newspapers, to the drastic cost cutting action resulting from the reorganization plans and for the radio and internet businesses to the significant rise in revenues.

Consolidated net financial debt showed a further important improvement, with the net debt figure narrowing from € 208.2 million at the end of 2009 to € 135 million at December 31 2010, with a financial surplus of € 73.2 million generated.

Consolidated equity rose from € 485.6 million at December 31 2009 to € 539.4 million at December 31 2010.

The payrolls of the group, including temporary contracts, contained 2,789 employees at the end of December, down by 327 from 3,116 at December 31 2009. In the last three years the group’s workforce has shrunk by 662 people, which is approximately 20%.

The Board of Directors of the parent company Gruppo Editoriale L’Espresso, which met on March 8 2011, proposed distributing a dividend for 2010 of € 0.074 per share (no dividend was distributed last year).

The situation of weak growth of the economy with unclear macroeconomic prospects experienced in 2010 has continued into 2011 too. Thus it is expected that the year 2011 will see a repeat of the same dynamics recorded in the publishing sector in 2010.

As far as circulation is concerned, the structural tendency towards erosion experienced in recent years appears to be continuing even though it has been somewhat mitigated by a renewed interest in the press caused by political turbulence. And as far as advertising is concerned the trends observed in the first two months of the year would seem to confirm a moderately positive performance.

In this context, the group is continuing to take action to counter the unfavourable trends in the sector by improving its traditional products, developing the digital area, a dynamic management of the advertising concessionaire and constant attention to cost cutting. 

All of this, together with the cost cutting action already in place, should enable the group to achieve positive performance both in terms of sales and of earnings, provided that there are no marked changes in the scenario.